More State Medicaid Programs Use Preferred Drug Lists To Manage Costs

March 1, 2004

Medicaid, enacted in 1965, is currently costing over $200 billion per year. With rapidly rising health care costs, including prescription drugs, state Medicaid budgets are feeling the strain. Like its effect on private insurance, prescription drug costs had the highest growth rate among Medicaid services, increasing approximately 19 percent over the past several years. To combat this trend, states are employing several strategies.

In particular, more states are concentrating efforts to control costs through preferred drug lists (PDLs). As of last September, 39 states had some type of control restricting access to certain prescription drugs. These controls have taken the form of PDLs, prior authorization processes, or prescription limits. Last year alone, 49 states had filed a total of 290 legislative bills concerning their pharmaceutical programs or policies. This year, there will be even more activity and uncertainty at the state level regarding drug costs.

"Despite all of this legislative activity, there is no guarantee that the states will see any savings," says Brian Bamberger, president of MediMedia Information Technologies. "In fact, there is a growing body of evidence that says the opposite is true. Several studies have been published concluding that the more restrictions are introduced by states, the more patients move to higher-priced Medicaid services." In addition, due to federal statutes, states have limited authority to adopt formularies.

MediMedia Information Technologies has launched State Medicaid Monitor, a database service that includes copayment ranges, enrollment statistics, demographic statistics, prior authorization procedures, and excluded drug classes. The information in the monitor can be used to compare specific restrictions or policies regarding a specific therapy to any other state in the data source.